Capital and Revenue Payments
Expenditure is the full amount incurred by a business concern, whether paid or not, while the term “payment” refers to the amount actually paid.
Payments come in two types:
- Capital payments
- Revenue payments
Capital payments are the amounts actually paid on account of some capital expenditures.
Furniture is purchased from Wild Wood Furniture for $7,000. Initially, $4,000 in cash is paid and a promise is made to pay the balance within 5 months. In this case, $7,000 is a capital expenditure and $4,000 is a capital payment.
Revenue payments are the amounts actually paid on account of some revenue expenditures.
Merchandise worth $1,300 is purchased from John & Sons by paying $800 in cash and promising to pay the balance after 3 months. Here, $1,300 is classified as revenue expenditure and $800 is the revenue payment.
About the Author
True Tamplin, BSc, CEPF®
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True contributes to his own finance dictionary, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.